UFOC

Sample UFOC

FRANCHISE OFFERING CIRCULAR

The franchisee relates to the operation of a retail establishment ("Shoppe") that produces plain and decorated cookies, fanciful cookie arrangements and related products for retail sale to the general public.

The initial franchise fee for a Shoppe franchise is $27,500 subject to adjustment based on the population in the Primary Marketing Area and other factors, creating a range from $12,500 to $35,000. See Item 5 for details regarding the initial fee and its calculation when greater or less than $27,500. Item 5 describes other payments totaling $9,568. The estimated initial investment for a Shoppe franchise ranges from $90,000 to $180,000. See Item 7.

RISK FACTORS

1. THE FRANCHISE AGREEMENT REQUIRES THAT ALL DISAGREEMENTS BE SETTLED BY ARBITRATION WITH, OR SUIT AGAINST, US IN TEXAS. OUT-OF-STATE ARBITRATION OR SUIT MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST YOU MORE TO ARBITRATE WITH OR BRING SUIT AGAINST US IN TEXAS THAN IN YOUR HOME STATE.

2. THE FRANCHISE AGREEMENT STATES THAT TEXAS LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.

3. THE FRANCHISE AGREEMENT STATES THAT FAILURE TO MEET MINIMUM PERFORMANCE STANDARDS IS GROUNDS FOR NONRENEWAL OF THE FRANCHISE FOLLOWING EXPIRATION OF THE INITIAL ONE YEAR TERM.

4. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

Information about comparisons of franchisors is available. Call the state administrators listed in Exhibit N or your public library for sources of information.

Registration of this franchise with the state does not mean that the state recommends it or has verified the information in this offering circular. If you learn that anything in this offering circular is untrue, contact the Federal Trade Commission and the State authority listed in Exhibit

Date of Issuance: See FTC Cover Page and State Registrations Page

COOKIES BY DESIGN, INC. RECEIVED (formerly MGW Group, In PT0FC0RP 0R AT i 0 a Texas corporation SANFRANCtSCO

1865 Summit Avenue, Suite 605

Piano, Texas 75074 '06 APR "3 A 9 34 (972) 398-9536; (800) 945-2665 www.cookiebouquet.com and www.cookiesbydesign.com

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FRANCHISE OFFERING CIRCULAR FOR PROSPECTIVE FRANCHISEES

COOKIES BY DESIGN, INC.

(formerly MGW GROUP, INC.)

a Texas corporation 1865 Summit Avenue, Suite 605

Piano, Texas 75074

(972) 398-9536; (800) 945-2665

www.cookiebouquet.com and www.cookiesbydesign.com

INFORMATION FOR PROSPECTIVE FRANCHISEES REQUIRED BY THE FEDERAL TRADE COMMISSION

To protect you, we've required your Franchisor to give you this information. We haven't checked it and don't know if it's correct. It should help you make up your mind. Study it carefully. While it includes some information about your contract, don't rely on it alone to understand your contract. Read all of your contract carefully. Buying a franchise is a complicated investment. Take your time to decide. If possible, show your contract and this information to an advisor, like a lawyer or an accountant. If you find anything you think may be wrong or anything important that's been left out, you should let us know about it. It may be against the law.

There may also be laws on franchising in your state. Ask your state agencies about them.

FEDERAL TRADE COMMISSION Washington, D. C. 20580

Issuance Date: March 31,2006

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COOKIES BY DESIGN, INC. STATE REGISTRATIONS

This Offering Circular is registered, on file or exempt from registration in the following states with franchise registration and disclosure laws:

State Effective Date

California	Effective Date
Florida	Effective Date
Hawaii	Effective Date
Illinois	Effective Date
Indiana	Effective Date
Maryland	Effective Date
Michigan	Effective Date
Minnesota	Effective Date
Nebraska	Effective Date
New York	Effective Date
North Dakota	Effective Date
Rhode Island	Effective Date
South Dakota	Effective Date
Utah	Effective Date
Virginia	Effective Date
Washington	Effective Date
. Wisconsin	Effective Date

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Item

Table of Contents

Page No.

1. The Franchisor, Its Predecessors and Affiliates........................................................................................1

2. Business Experience..................................................................................................................................3

3. Litigation...................................................................................................................................................5

4. Bankruptcy................................................................................................................................................6

5. Initial Franchise Fee..................................................................................................................................7

6. Other Fees................................................................................................................................................10

7. Initial Investment.....................................................................................................................................14

8. Restrictions on Sources of Products and Services...................................................................................17

9. Franchisee's Obligations.........................................................................................................................20

10. Financing Arrangements.......................................................................................................................23

11. Franchisor's Obligations.......................................................................................................................24

12. Territory.................................................................................................................................................30

13. Trademarks............................................................................................................................................33

14. Patents, Copyrights and Proprietary Information..................................................................................42

15. Obligation to Participate in the Actual Operation of the Franchised Business.....................................44

16. Restrictions on What the Franchisee May Sell......................................................................................45

17. Renewal, Termination, Transfer and Dispute Resolution.....................................................................46

18. Public Figures........................................................................................................................................54

19. Earnings Claims.....................................................................................................................................54

20. List of Outlets........................................................................................................................................54

21. Financial Statements..............................................................................................................................56

22. Contracts................................................................................................................................................57

23. Receipt...................................................................................................................................................57

State Addenda

1. California

2. Illinois

3. Maryland

4. Minnesota

5. New York

6. North Dakota

7. Rhode Island

8. Washington

Franchise Offering Circular - Page i Form 2006

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Exhibits

A. Financial Statements

B. Franchise Licensing Agreement (including State Specific Addenda)

C. Area Development Agreement (including State Specific Addenda)

D. Site Agreement

E. Master Sublicense Agreement (Disney, Garfield, Trading Spaces and Curious George)

F. Receipt for Processing Fee

G. Promissory Note(s) and Guaranty

H. Member Agreement of The MAP Group

I. Automatic Funds Transfer Agreement

J. Table of Contents of Operations Manual

K. Franchisees Currently in Operation

L. Former Franchisees

M. Receipt for Completed Franchise Licensing Agreement/Area Development Agreement and

Related Documents

N. State Administrators

O. Agents for Service of Process

P. Additional Trademark Registrations and Applications

Q. Schedule of Copyright Registrations

R. CBDI Sales and Marketing Point of Sale Software End User License Agreement

S. General Release

T. Receipt for Offering Circular

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1. The Franchisor, Its Predecessors and Affiliates

To simplify the language in this Offering Circular we refer to Cookies by Design, Inc., the franchisor, as "CBDF or by use of the first person plural pronoun ("we," "our" or "us"). We refer to the person, corporation or other entity to whom CBDI grants the franchise by use of the second person pronoun ("you" or "your"). The reference includes the owners of a franchisee that is a business entity. CBDI, formerly known as MGW Group, Inc. and as Cookie Bouquet Franchising Corporation, is a Texas corporation with its principal place of business at 1865 Summit Avenue, Suite 605, Piano, Texas 75074. Mary Gwen Willhite incorporated us in Texas on February 12, 1991. We acquired substantially all of our assets from Cookie Bouquet, Inc., a Texas corporation, ("CBI").

Mary Gwen Willhite organized CBI on June 3, 1986, to operate a store (a "Shoppe") located at 6757 Arapaho Road, Suite 707, Dallas, Texas 75248 and, later, to operate the franchising business we now conduct. We acquired all of the outstanding stock of CBI on May 1, 1991, and CBI became our wholly-owned subsidiary. As of June 1, 1991, CBI transferred the assets of its franchising business to us. We changed our name from MGW Group, Inc. to Cookies by Design, Inc. on January 1, 2005.

CBI acquired the rights to use the name COOKIE BOUQUET® from its founder, Mary Gwen Willhite, who used this name in the operation of a cookie arrangements business in Tulsa, Oklahoma under the name of Cookie Bouquet Inc., an Oklahoma corporation (the "Oklahoma Corporation"), which was incorporated on May 25, 1983. Ms. Willhite sold substantially all of the operating assets of the Oklahoma Corporation to a third party on June 2, 1987, except the trade name COOKIE BOUQUET®, which she licensed to the purchaser. She then liquidated the Oklahoma Corporation. In May 1996, CBI dissolved and transferred all of its assets and liabilities to us. We operated the Shoppe that CBI opened in 1986 until January 2001, when we sold the Shoppe to a franchisee. We no longer operate any Shoppes.

We do business solely under the name Cookies by Design, Inc. We license franchisees to operate under the trade name COOKIES BY DESIGN®. We also grant master sublicenses to qualified franchisees to use certain intellectual property of Disney Enterprises, Inc. ("Disney"), of Paws, Incorporated, creator of the Garfield cartoon characters ("Paws"), of Discovery Licensing, Inc., creator of the Trading Spaces cartoon characters ("Discovery"), and of Universal Studios Licensing LLP, licensee of the Curious George books ("Universal"). Item 13 of this Offering Circular more fully discusses the trade name arrangements and the sublicenses.

We award franchises (the "Franchise") to develop and operate a business that produces plain and decorated cookies, fanciful cookie arrangements and related products for retail sale to the general public (the "Franchisee! Business"). As a condition to grant of a Franchise and to help you decide about becoming a COOKIES BY DESIGN® franchisee, you must first attend a "Discovery Day," at our headquarters in Piano, Texas, a suburb of Dallas. At Discovery Day, you meet our staff, learn about a COOKIES BY DESIGN® Franchise and have the opportunity to ask questions.

We do not franchise or operate any other type of business. As part of the Franchise, you will also have the right to use certain trademarks and copyrights of Disney ("Mickey Mouse®" and related characters and "Winnie the Pooh®" and related characters), of Paws ("Garfield®"), of Discovery ("Trading Spaces®") and of Universal ("Curious George®") in the preparation of your products. You must sign the Master Sublicense Agreement in the form of Exhibit E to this Offering Circular. We refer to the rights to use these marks as a "Sublicense." See Items 6, 7, 13, 14 and 16. You also must become a member of The MAP Group. See Items 6 and 11.

The Franchise, which is characterized by a system that includes methods of operation, control, manuals covering business practices and policies, merchandising, advertising, copyrighted cookie and arrangement designs, sales and promotional techniques and personnel training (the "System"), gives you

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the right to establish a franchised Shoppe that uses the System and the Licensed Marks within a particular market (the "Primary Marketing Area"), which is described in the Franchise Licensing Agreement (the "Franchise Agreement") in the form attached as Exhibit B to this Offering Circular. You may establish in the Primary Marketing Area and operate at a specific location (the "Premises") only one Shoppe. If you have not selected a Primary Marketing Area for your Shoppe by the time you are ready to sign a Franchise Agreement, you may sign a Site Agreement in the form of Exhibit P. See Items 8 and 12. You may relocate the Shoppe, open a satellite location ("Satellite") and/or a kiosk location ("Kiosk") only after opening your Shoppe under the conditions described in the Franchise Agreement. We refer to the Franchisees, Franchised Businesses and the Shoppes operating under the Licensed Marks and using the System collectively as (the "Chain").

Occasionally, we may offer an Area Development Agreement (the "Development Agreement") in the form attached as Exhibit C to this Offering Circular granting rights to establish multiple Shoppes within a particular area (the "Defined Territory") described in the Development Agreement. You and CBDI must enter into a separate Franchise Agreement for each Shoppe you establish under the terms of the Development Schedule attached to the Development Agreement. The number of Shoppes to be developed under each Development Agreement varies depending on factors like the size, affluence and population density in the Defined Territory. To be considered for a Development Agreement, you must have operated one Shoppe in accordance with all of the terms and conditions of its Franchise Agreement, you must be in compliance with any other agreement with us and with our Confidential Manuals (as defined in the Franchise Agreement) and any other applicable manuals for at least six consecutive months, and during that period, the Shoppe must exceed the applicable Minimum Performance Standard by at least 20%. We grant Development Agreements in our sole discretion. The fact that you may meet the eligibility requirements does not mean that we will enter into a Development Agreement with you. We are under no obligation to offer you or anyone else that opportunity.

We believe that Franchised Businesses attract customers who use the services of florists and/or bakeries. We believe that the market for our products is a developing market. The Franchisees compete with other local and nationally franchised businesses providing similar services. Your ability to compete in this market depends in large part on geographical area, specific site location, general economic conditions and your capabilities. Your affiliation with the Chain does not guarantee you a successful or profitable business operation.

We have offered Franchises to operate Shoppes under the trade name COOKIE BOUQUET® since June 1, 1991. As of December 31, 2005, the Chain consisted of 231 Shoppes. We began to offer Disney Sublicenses to our franchisees on July 16, 1999; Garfield Sublicenses on August 15, 2003, Trading Spaces Sublicenses in July 2004, and Universal Sublicenses in March 2006. See Exhibit E to this Offering Circular for the form of Master Subfranchise Agreement.

CBI offered franchises to operate Shoppes under the trade name COOKIE BOUQUET® between November 1987 and May 31, 1991. Neither Mary Gwen Willhite, nor the Oklahoma Corporation has ever offered franchises under any trade name. Ms. Willhite has never operated a Shoppe, but CBI operated a Shoppe under the trade name COOKIE BOUQUET® from June 3, 1986 until May 31, 1996, when it dissolved and transferred its assets, including the Shoppe to us. We operated the transferred Shoppe under the trade name COOKIE BOUQUET® until January 2001. We have offered franchises to operate Shoppes under the trade name COOKIES BY DESIGN® since November 1990. No other predecessor or affiliate has offered franchises for the operation of Shoppes under the trade name COOKIES BY DESIGN®. Neither we nor any predecessor, nor any affiliate of ours has previously granted franchises in any other line of business.

Exhibit O to this Offering Circular lists our agents for service of process.

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Other than local health department regulations and other laws applicable to businesses generally, there are no industry specific laws affecting the Franchised Business.

2. Business Experience Chairman of the Board, CEO and Sole Director: Mary Gwen Wellhtte

Ms. Willhite is our Chairman of the Board and sole director, positions she has held since February 1991. She became our CEO in December 2004, a position she also held from February 1991 to July 1997. She served from April 1983 through January 1987 as President of the Oklahoma Corporation, located outside of Tulsa, Oklahoma, and from June 1986 to February 1991 as the Chairman of the Board, sole shareholder and President of CBI in Dallas, Texas.

President and Chtef Operating Officer: Mary Kennedy Thompson, CFE

Ms. Thompson joined us as Field Services Coordinator in November 2000, was promoted to Director of Field Operations in January 2002, to Executive Director of Franchise Operations in January 2003 and to President and COO in December 2004. For more than five years before she joined CBDI, Ms. Thompson owned and operated her own Shoppes in Austin and Round Rock, Texas. Ms. Thompson earned a designation as a CFE from the International Franchise Association in February 2003.

Chief Financial Officer: David C. Patterson, CPA, CFE

Mr. Patterson was named our Chief Financial Officer in December 2004. From February 1994 until December 2004 he occupied the position of Vice President in charge of our franchise development, a function he still performs on an interim basis. He also served from January 2003 until December 2004 as our Executive Director of Franchise Development. From June 1991 through September 1993, Mr. Patterson was employed by Arthur Andersen & Co. in Dallas, Texas as a senior accountant. He owned and operated a Shoppe from 1992 to 1997. Mr. Patterson earned a designation as a CFE from the International Franchise Association in February 2001.

Vice President: Katie Patterson, CFE

Our Board of Directors elected Ms. Patterson to the position of Vice President in charge of training and franchise relations in February 1994. Ms. Patterson was also named Director of Special Events in January 2003. She served in various positions with CBI and CBDI in the Dallas, Texas office from May 1990 to February 1994. She owned and operated a Shoppe from 1992 to 1997. Ms. Patterson earned a designation as a CFE from the International Franchise Association in February 2001.

Vice President: AnettaBoney

Our Board of Directors elected Ms. Boney to the position of Vice President of Creative Services in March 1999 and promoted her to Vice President of Design Services in January 2003. Ms. Boney joined CBI at its inception in 1984 and held various positions, including manager of the founder's Shoppe. From January 1992 to March 1999, she held various positions in Our Franchise Services department, consisting of the development of arrangement design, cookie cutter designs, and decorating training for COOKIE COLLEGE, as well as ongoing support services for COOKIE BOUQUET®/COOKIE BY DESIGN® franchises.

Secretary and Director of Corporate Projects: Teresa Kinney

Our Board of Directors elected Ms. Kinney to the position of Director of Corporate Projects in December 2004. She was named Secretary of the company in September 2003. She has previously held

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various positions with us. Before joining us, Ms. Kinney worked for Thompson & Knight, LLP in Dallas, Texas as a legal secretary from August 1989 to October 1999. She received a Bachelor of Arts degree from Texas Tech University in 1984.

Executive Director of Franchise Operations: Tom Campbell

Our Board of Directors elected Mr. Campbell to the position of Executive Director of Franchise Operations in December 2004. Mr. Campbell served as our Director of Supply Chain Management between the time he joined us in November 2001 until December 2004. Before joining us, he worked 25 years in corporate management positions in the hospitality industry, with responsibility for global purchasing, distribution and operation functions at Brinker International, Carlson Hospitality Worldwide and Marriott International.

Director of Financial Operations: Cynthia (Cindy) Vaughn-Pharr, CPA

Ms. Vaughn-Pharr joined CBDI as Director of Financial Operations in June 2000. Her multifaceted position involves service as our Accounting Manager and Controller and as coordinator of our human resources functions. Before joining CBDI, Ms. Vaughn-Pharr managed the U.S. accounting department of LaserComm, Inc. in Piano, Texas from September 1999 until June 2000; served as a general ledger accountant for Pagenet Corporation in Dallas, Texas from August 1998 until September 1999; and served as a Senior Financial Accountant and Credit Manager for Benchmarq Microelectronics, Inc. in Dallas, Texas from April 1996 until August 1998.

Training and Development Coordinator: Candace Ditsch

Ms. Ditsch joined us in July 2004 as the Training and Development Coordinator. Before that she was employed at Brown McCarroll, LLP in Dallas, Texas from 2001 to 2004, and served as a Program Director at Trinity United Methodist Church in Denton, Texas from 1999 to 2001. She obtained her Bachelor of Science degree in Human and Organizational Development from Vanderbilt University and a Masters of Science degree in Management and Administrative Sciences from the University of Texas at Dallas.

Director of National Programs: Barbara Gonzales

Ms. Gonzles joined us in August 2002. She served in various positions for us from 2002 until August 2004 when she was named the National Programs Coordinator. She served as the National Programs Coordinator from August 2004 until January 2006 when she was named Director of National Programs. Prior to her work for us, she was employed as a Customer Relations Manager for 7-11, Inc. in Dallas, Texas from 2001 to 2002. She earned a Business Administration Management degree with an emphasis in leadership from New Mexico State University in 1999.

Director of Marketing: Frank Sobyak

Mr. Sobyak joined us in October 2005 as the Director of Marketing. Prior to that, he was employed as the Vice President of Marketing for Glamour Shots in Frisco, Texas from April 2005 to July 2005, served as the Director of Marketing for Interstate Batteries' All Battery Center stores in Dallas, Texas from September 2004 until March 2005, and was a principal owner/operator of his own start up company called Gather Round Games from April 2000 until August 2004. In addition, Frank has held senior level marketing positions at Sprint, Automatic Data Processing, and the consumer collectibles company, The Franklin Mint. He earned a Bachelors of Science degree in Industrial Engineering from Lehigh University in 1984 and a Masters in Business Administration degree in Marketing from The University of Michigan in 1989.

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3. Litigation

Litigation/Civil: MGW Group, Inc. v. S&A Knudson Corporation, et al., Superior Court of California. Sacramento County ("Case No. 529876). On July 16, 1993, CBI filed suit against a franchisee, S&A Knudson Corporation, a California corporation ("Knudson"), Steven Knudson and Anita Knudson for non-payment of royalty and franchise fee payments due under the Franchise Agreement. The defendants filed a cross-complaint, alleging that CBI had not registered the sale of its franchises in California, as required under California law, and that CBI misrepresented the amount of profits that the defendants could expect to make by operating a Franchise.

In this same matter, on July 20, 1994, California Cookie Bouquet, Inc. ("CCBF), a California corporation entitled by agreement to a share of the royalties paid by Knudson to CBI, filed suit against Knudson, and Does 1 through 20 (meaning unknown defendants, i.e. "John Does") for breach of contract for failure to make periodic royalty payments and a franchise fee payment of $200 per month to CCBI due under the Franchise Agreement, for money received by Knudson for the benefit of CCBI, for account stated, unfair competition, and misappropriation of trade secrets. California Cookie Bouquet, Inc., v. S&A Knudson Corporation, et al., Superior Court of California, Sacramento County (Case No. 541831). CCBI sought preliminary and permanent injunctions, compensatory damages, punitive damages, reasonable attorneys' fees, interest through date of judgment, costs and disbursements, and other relief as the court would deem appropriate.

In settlement of the disputed claims, all the parties to these lawsuits entered into a General Release and Settlement Agreement and Stipulation for Entry of Judgment (Conditional) (the "Settlement Agreement"), effective September 26, 1994. Under the confidential terms of the Settlement Agreement the parties executed mutual releases in which no party admitted to any allegation made in the suits; CBI and CCBI agreed to pay to Knudson the sum of $22,500 over time, representing the settlement amount and $1,990.58 representing fees and expenses of litigation; and Knudson agreed to remove and return certain items and equipment used in the franchised business in which Cookie Bouquet Franchising Corporation claimed a proprietary interest and not to contact any Cookie Bouquet franchisee regarding the litigation or settlement. The parties complied with the terms of the Settlement Agreement and a dismissal with prejudice was entered by the court on February 4, 1998.

Litigation/Civil: The Cookie Bouquet of Houston. Inc. v. Cookie Bouquet of Clear Lake, Inc. and Cookie Bouquet, Inc.: 61st Judicial District Court of Harris County, Texas; Cause No. 95-003041. On January 23, 1995, The Cookie Bouquet of Houston, Inc. ("CBH"), a franchisee of CBDI, filed suit against Cookie Bouquet of Clear Lake, Inc. ("CBCL"), another franchisee of CBDI, and against Cookie Bouquet, Inc., Our predecessor in interest. CBH asserted a breach of contract action against CBCL, for failure to pay its share of advertising cost and sought (i) a declaratory judgment against CBCL, and Cookie Bouquet, Inc., (based on CBH's, assertion that it was a third party beneficiary to the franchise agreement entered into by CBCL, and Cookie Bouquet, Inc.) declaring the franchise agreement terminated, (ii) prejudgment and post judgment interest, attorneys' fees and costs of court, and (iii) other relief to which it may be entitled. CBH, asserted that Cookie Bouquet, Inc., is a necessary party to this action, pursuant to applicable law, inasmuch as it is a person who has or claims an interest affected by the declaratory judgment sought. In January 1996, CBH amended its petition to include claims for past due commissions and fees allegedly earned for its assistance with the sale of franchises in the Houston area pursuant to an agreement with CBDI, which claims would offset past due royalties owed by CBH to CBDI.

The parties participated in binding mediation on February 21, 1996, which resulted in a settlement of all of the claims. The parties executed a Mutual Release and a Memorandum of Agreement. Pursuant to the Memorandum of Agreement, (a) the parties amended the CBH franchise agreement to (i) modify CBH's protected territory by deleting some counties and adding others, (ii) delete certain addenda

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to the franchise agreement declaring void three agreements between CBH and CBDI, and (iii) delete any third party beneficiary rights CBH might have under any other Houston area franchise agreement; (b) CBDI agreed not to oppose the entering into by CBH and any prospective purchaser of CBH's development rights of local advertising agreements collateral to, but not a part of, any franchise agreement signed by the prospective purchaser and CBDI; (c) any purchaser of CBH's development rights must sign the then current form of CBDI franchise agreement; (d) CBDI eliminated all marketing assistance responsibilities of CBH; and (e) CBDI agreed to pay CBH (i) $83,000 over the next six months in settlement of disputes over commissions earned and royalty fees owed by CBH and (ii) on an ongoing basis, a commission for third party franchises developed as a result of sale of a portion of CBH's development rights. The court entered an Order of Dismissal with Prejudice on June 10, 1996.

Litigation/Civil: MGW Group, Inc. v. Sherrie Ann Rodda and Michael John Rodda: In the 362nd Judicial District Court of Denton County. Texas: Cause No. 97-40561-362. On June 25, 1997, MGW Group, Inc. filed a Petition In Intervention in a pending divorce action between Sherrie Ann Rodda ("Ms. Rodda") and Michael John Rodda ("Mr. Rodda," together with Ms. Rodda, collectively referred to herein as the "Defendants"). Ms. Rodda was a franchisee of Cookies by Design, Inc. and Mr. Rodda actively worked as an employee in Ms. Rodda's franchise Shoppe. MGW asserted claims against the Defendants for misappropriation of trade secrets and fraud. MGW was seeking termination of the franchise agreement and a permanent injunction enjoining the Defendants from disclosing, using, and/or selling MGW's confidential trade secrets and proprietary business information. MGW's claims were severed from the divorce action. On August 19, 1997, Ms. Rodda filed an Answer and Counterclaim, requesting (i) declaratory judgment that the franchise agreement was void from the beginning, alleging, in part, MGW failed to comply with applicable franchise law; and further alleging (ii) fraud; (iii) violation of the Texas Business Opportunity Act; (iv) breach of contract; and (iv) antitrust violations. Ms. Rodda was seeking relief in the nature of judgment declaring the franchise agreement void, recovery of all fees and royalties paid under the franchise agreement, and attorneys' fees, actual and/or compensatory damages, punitive damages, additional damages, treble damages, attorneys' fees, prejudgment and postjudgment interest and other relief afforded by the court. On March 2, 1998, a settlement of this litigation between MGW and Ms. Rodda was reached in which Ms. Rodda agreed to (a) transfer her franchise license within a specified time period; (b) pay MGW $3,000; and (c) not be involved in any business or department or division of a business that makes or sells decorated cookies, cookies-on-a-stick, or cookie arrangements, or a bakery, in the United States or within a 20 mile radius of any other Unit within the System in existence on the date of the Franchise Agreement. The parties agreed to a dismissal of the litigation with respect to claims and counterclaims between MGW and Ms. Rodda. An order dismissing the claims and counterclaims between MGW and Ms. Rodda was entered by the Court on March 17, 1998, and Ms. Rodda has since transferred her franchise license to an independent third party.

On February 2, 1999, a settlement of this litigation between MGW and Mr. Rodda, in which Mr. Rodda agreed to (a) pay MGW $300; and (b) for a period of 10 years, not be involved in any business or department or division of a business that makes or sells decorated cookies, cookies-on-a-stick, or cookie arrangements, or a bakery in the United States, or within a 20-mile radius of any other unit within the System in existence on the date of the Franchise Agreement. An order dismissing the claims by MGW was entered by the Court on July 15, 1999.

To the best of our knowledge, no litigation other than the four matters listed above must be disclosed in this Offering Circular.

4. Bankruptcy

No person identified in Items 1 or 2 of this Offering Circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code that must be disclosed in this Item.

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5. Initial Franchise Fee

PROCESSING FEE. No sooner than 10 days after receipt of this Offering Circular and before the execution of either a Development Agreement or a Franchise Agreement, you must pay us a fee of $250 (the "Processing Fee"). This amount covers our initial expenses including time, effort and money spent to evaluate, among other things, your background and credit history and your financial, management and merchandising ability and skill. The Processing Fee does not bind or commit us or you to the final execution of a Development Agreement or a Franchise Agreement. We do not refund Processing Fees.

SITE AGREEMENT DEPOSIT. At the time you execute a Site Agreement in the form attached to this Offering Circular as Exhibit D (the "Site Agreement"), and before the execution of either a Development Agreement or a Franchise Agreement, you must deposit $1,000 (the "Site Agreement Deposit") with us. You will have 90 days to find an acceptable site for the Franchise. The term of the Site Agreement expires in 120 days. This amount will cover our expenses including time, effort and money we spend in exchanging information, preparation of documentation, reserving a Primary Marketing Area, etc. If either of us terminates the Site Agreement within the first 30 days, we refund the entire Site Agreement Deposit. If we terminate the Site Agreement for breach or anticipated breach of the confidentiality provisions, or misrepresent information on your application for a Franchise, we will not refund any part of the Site Agreement Deposit. If you withdraw or terminate after the first 30 days, we will refund the Site Agreement Deposit after deducting a maximum of $500. If you later execute either a Development Agreement or a Franchise Agreement, we will credit the Site Agreement Deposit against any initial fees due at that time.

Payments for Other Services and Goods. You must purchase from us the customized software and support programs that comprise your POS Computer Program. You must purchase from us or one of our designated suppliers your stencils and cookie cutters, an appliance we require for use in the operation of a Shoppe and plastic bossed containers. (See the CBDI Sales and Marketing Point of Sale Software End User License Agreement attached as Exhibit R. which requires you to pay us a $2,500 License Fee and an Annual Maintenance Fee of $300) The initial supply of these items costs a total of $9,568. The cost is uniform to all franchisees and, once your Shoppe opens, is not refundable.

FRANCHISE AGREEMENT. By the date on which all parties execute the Franchise Agreement, you must pay us the initial franchise fee in full. The initial franchise fee is generally $27,500, but it may increase or decrease depending on the density and affluence of the residential and non-residential population of the Primary Marketing Area of a particular franchise and other demographic factors reported by the most recent United States Census. Also, we are a member of the International Franchise Association and participate in the LFA's VetFran Program. Participants in VetFran offer a 25% discount on initial franchise fees to veterans of U.S. Armed Forces who otherwise meet the requirements of the Program.

We charge the typical $27,500 initial franchise fee for a franchise with a Primary Marketing Area that includes a resident population of approximately 250,000 people, up to approximately half of whose household incomes exceed $40,500, and a significant mix of retail, commercial, office and/or institutional uses. The initial franchise fee may rise above $27,500 if the resident population in the Primary Marketing Area is larger and more than half the population resides in households that have incomes in excess of $40,500 or if the Primary Marketing Area includes a disproportionately large number of retail, commercial, medical or institutional uses on a combined basis. The initial franchise fee may fall below $27,500 if the population in the Primary Marketing Area is less than 250,000 people. The minimum initial franchise fee is $12,500. In some cases in which the resident population in a Primary Marketing Area is less affluent, we may expand the Primary Marketing Area geographically to increase the population beyond 250,000. The formula follows:

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Base Franchise Fee

Location Multiplier______Initial Franchise Fee

$10,000.00 X ____________________ = ____________________

a. We base the location multiplier on various demographic factors and statistics obtained from the Site Targeter zip code mapping software distributed by Tactician® Corporation.

CBD1 determines the total estimated population for the Primary Marketing Area for the year in question from the statistics mentioned above.

CBD1 determines the weighted average median household income for the Primary Marketing Area for the year in question from the statistics mentioned above.

b. From the demographic information CBD1 calculates the location multiplier based on one of the following:

If the population within the Primary Marketing Area is approximately 250,000 and the median household income is greater than or equal to $40,500, then CBDI sets the multiplier at 2.75.

If the population within the Primary Marketing Area is approximately 250,000 and the median household income is less than $40,500, then:

(A) CBDI may increase the Primary Marketing Area so that the population is larger than 250,000 and CBDI sets the multiplier at 2.75, or

(B) CBDI lowers the multiplier to between 1.25 and 2.75 depending on how low the population and/or the median income numbers are.

CBDI rarely uses alternative B because it becomes very subjective.

If the population within the Primary Marketing Area is larger than 250,000 and the median household income is greater than or equal to $40,500, then CBDI sets the multiplier at a number approximately equal to the result achieved by dividing the total population of the Primary Marketing Area by 90,000.

If the population within the Primary Marketing Area is less than 250,000 and the median household income is greater than or equal to $40,500, then CBDI sets the multiplier at a number approximately equal to the result achieved by dividing the total population of the Primary Marketing Area by 90,000.

If the population within the Primary Marketing Area is less than 150,000 and the median household income is less than $40,500, then CBDI sets the multiplier at 1.25.

The initial franchise fee paid by franchisees during the fiscal year ended December 31, 2005 ranged from $28,100 to $37,700 (though in prior years the range has been as high as $52,000) using a similar formula, but with a median household income basis of $40,000. If the parties sign a Development Agreement calling for the development of a number of Shoppes in a geographic area, it is common for us to increase beyond 250,000 the population size included in the Primary Marketing Area of each Franchise developed under the Development Agreement.

The initial franchise fee for the Shoppe is non-refundable with one exception. You may receive a partial refund of the initial franchise fee under the conditions described in Section 6(s) of the Franchise Agreement if we terminate the Franchise because you or your Manager (as defined in Item 15 of this Offering Circular) fail to complete initial training to our reasonable satisfaction. The refund will equal the greater of (1) $1,500 or (2) the amount you paid us, less costs and expenses we incurred with respect to your Shoppe. We do not charge an initial fee for the Sublicense.

We add the proceeds from franchise fees to our general working capital and use them, to the extent necessary, to pay expenses we incur, including training and initial services to Franchisees.

When you execute a Franchise Agreement in accordance with a Development Agreement, the mechanics of the payment of the initial franchise fee are different. The paragraph below captioned "Area Development Agreement" provides a description of fees paid at the time of the execution of an Area Development Agreement. In the case of the execution of a Franchise Agreement in accordance with the Development Schedule, the initial franchise fee for that Shoppe (Column II of the Development Schedule) is payable on the date of execution. When you execute the first Franchise Agreement under a Development Agreement, you receive a 100% credit for that initial franchise fee for the development of that Shoppe against the development fee that you paid when you executed the Development Agreement. For the second and each Shoppe developed at a later date under a Development Agreement, we credit an

Franchise Offering Circular -Page 8 1417734 2.DOC

Form 2006

amount equal to 25% of the amount of the initial franchise fee for that Shoppe against the development fee, reducing the amount of the initial franchise fee payable at that time by a like amount.

AREA DEVELOPMENT AGREEMENT. Upon execution of a Development Agreement, you must pay us a development fee. We do not refund development fees. The development fee equals the full amount of the initial franchise fee for the first Shoppe scheduled for development under the Development Agreement, plus 25% of the total initial franchise fees required for all other Shoppes scheduled for development under the Development Schedule. The preceding section describes the formula for determining initial franchise fees. We earn the non-refundable development fee upon execution of the Development Agreement in consideration for our previous development of the System and for other development opportunities we lost as a result of the development rights granted to you. We credit that portion of the development fee calculated by reference to a specific initial franchise fee for a Shoppe scheduled for opening in the future against the initial franchise fee for that particular Shoppe at the time of execution of the Franchise Agreement.

The method of calculating the development fee remains about the same for all Development Agreements we offer, although the amount of the development fee varies depending upon the number of Shoppes which you agree to develop and the population demographics for the first Shoppe Franchise granted.

SATELLITE AND KIOSK FEES. If you elect to open a Satellite in your Primary Marketing Area, you pay an annual licensing fee of $500 for each Satellite at the time you give us notice of the opening date of the Satellite. If you elect to open a Kiosk in your Primary Marketing Area, you pay a fee of $100 per month up to $500 annually based upon the time period for which you have the right to operate the Kiosk in a third-party location. If the period of time is longer than 12 months, but less than a full additional year, you pay the additional licensing fee before the 1^st day of the month following the expiration of the first year. For example, if the term of the lease for your Kiosk is 15 months, you would be required to pay $500 for the first 12 months in advance upon date of delivery of the notice of the actual opening date of the Kiosk and $300 at least 10 business days before the 1st day of the 13th month of the term to cover the remaining three months of the 15 month term. If your Kiosk agreement/lease provided for a five month extension, you would be required to pay $500 for the additional five months upon exercise of your extension option. We do not prorate or refund Satellite or Kiosk licensing fees.

WEBSITE AGREEMENTS. The End User License Agreement for CBDI/CB Website (the "Intranet Agreement") (see Items 6, 8 and 12) and the Orders Administration Website Participation and License Agreement for the CBDI/CB Website (the "Admin Site Agreement") (see Items 8 and 12) each permit us to charge fees for optional goods or services and administrative fees. Beginning in 2006, we plan to begin assessing an administrative fee on those Shoppes that participate in our online ordering program. The Specific fee has yet to be determined. We anticipate that the administrative fee will be approximately $2.00 per order received by a Shoppe and paid monthly to us. The Intranet Agreement requires you to pay a $100 administrative fee for each Authorized User (as defined in the Intranet Agreement) in excess of two. We currently do not impose or plan to impose any other fees in connection with our Websites.

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Page 9

6. Other Fees

Name of Fee	Amount h':	DueDati	Remarks¹
Licenses	The greater of:
a) Shoppe Fee	1) 6% of Gross Volume of Business³ or	Payable monthly by the 10th day of the next month
	2) Minimum annual fee⁴	No later than January 31 following the end of each year after the first full calendar year of operations
b) Satellite Fee	$500 per year	Payable annually	Opening a Satellite is optional. You must have our prior written consent.
c) Kiosk Fee	$ 100 per month up to a	Payable annually	Opening a Kiosk is optional. You
	maximum of $500 per		must have our prior written
	year		consent.
d) Marketing POS²	$300 per year

1 All fees are imposed by and payable to us, except for the cost of audited financial statements, advertising, cooperative advertising, insurance costs, maintenance expenses and remodeling/construction costs, which are recurring costs to you and imposed by the terms of the Franchise Agreement but not paid to us or collected by us for a third party. All fees are nonrefundable.

2 The license fee for the Marketing Point of Sale Software End User License Agreement is $2,500, and the annual maintenance fee is $300. (See Item 5).

3 "Gross Volume of Business" means "the aggregate gross amount of all revenues from whatever source derived (whether in the form of cash, credit, agreements to pay or other consideration, and whether or not payment is received at the time of sale and regardless of whether any of the amounts prove uncollectible) and through whatever communication or sales medium used which arise from or are derived by you or by any other person from business conducted or which originated in, on, from or through the Premises (including any Satellite or Kiosk), whether the business is conducted in compliance with or in violation of the terms of the Franchise Agreement, excluding sales tax or other tax receipts (the collection of which is required by law), delivery revenues and any refunds paid by you".

4 The minimum annual fee in year one is $4,200 and increases by 10% to 20% each following calendar year. The amount of the minimum annual fee is not an earnings or revenue projection and should not be relied upon as such.

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1417734 2.DOC

Form 2006

**■M'M^:! \ :Name of Fee ^::>{};^**	_:;:^j^:;":v:;^:;amoiint;s3;?:\|7;'^:;^;v	)i?>":' Due Date	Remarks¹
Master Sublicense			We must pay each of the Licensors
Agreement			a continuing fee based on your Gross Volume of Business from the sale of Licensed Articles. We retain the percentages shown in reimbursement of our costs to develop the various sublicense arrangements.
Disney	11 54% of your Net Sales	Each payable by the 10th	54% (Also see Disney Sublicense
	of Disney Licensed	day of the next month	Advertising below)
	Articles⁵
Garfield	8%ofyourNetSalesof Garfield Licensed Articles⁶		3% 4%
Trading Spaces	9%ofyourNetSalesof Trading Spaces Licensed Articles⁷		4%
Curious George (Universal)	9%ofyournetsalesof . Universal Licensed Articles⁸
Retail Assistance Program	$100	Payable upon execution
("RAP") Fee		of a RAP Listing Agreement

5 See the definition of "Net Exhibit E and Paragraph B,

6 See the definition of "Net Exhibit E and Paragraph B,

7 See the definition of "Net Exhibit E and Paragraph B.

8 See the definition of "Net Exhibit E and Paragraph B.

Sales of Licensed Articles" in Article II of the Master Sublicense Agreement,

4 of the Disney Sublicense Agreement.

Sales of Licensed Articles" in Article II of the Master Sublicense Agreement,

4 of the Garfield Sublicense Agreement.

Sales of Licensed Articles" in Article II of the Master Sublicense Agreement,

5 of the Trading Spaces Sublicense Agreement.

Sales of Licensed Articles" in Article II of the Master Sublicense Agreement, 4 of the Universal Sublicense Agreement.

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Form 2006

Name of Fee	Amouot:^;;;.^"^:'5;:';:"'	■^-f:; Due Date	Remarks¹
Advertising Marketing & Advertising Program Other Advertising Special Use Fund	Total Advertising fees payable to CBDI, an Association or a Special Use Fund may not exceed an aggregate of 2% of Gross Volume of Business. 1% of Gross Volume of Business. Varies based on local costs and charges by telephone companies and special promotions adopted by CBDI or The MAP Group. Not Formed. May not exceed 1% of Gross Volume of Business annually.	Payable monthly by the 10th day of the next month. As incurred. As directed by the governing documents when adopted by CBDI.	Although we cannot set a rate higher than 2% of Gross Volume of Business in the aggregate, Franchisees can approve contribution rates higher than 2%. The only Association now in existence is The MAP Group. You pay fees to The MAP Group. See Items 8 and 11. The MAP Group may set a rate higher than 1%. Used for listing(s) in local white and most predominantly used yellow pages of all local telephone directories in the Primary Marketing Area; to obtain and maintain any special promotional materials; for expenses for changes in the listing and promotional materials mentioned above; for a national toll free telephone number. Funds pay for creation of television and electronic communication advertising, and supporting print materials. See Item 11.
Disney Sublicense Advertising	1 % of the ir/2% Disney Sublicense continuing fees.	Payable monthly by the 10th day of the next month.	We pay the Disney National Advertising Fund what it collects from you.
Cooperative Advertising	As determined by a local cooperative.	As determined by the local cooperative.	None in existence at this time.
Additional Training/Assistance	CBDI imposes no training or tuition fees at this time, but has the right to do in the future.	As incurred	You are responsible for your travel and living expenses and those of your Manager for training for any additional training and assistance. Training to use the Licensed Articles is via audio/visual materials sent to you at your Shoppe.
Transfer⁹ a) Franchise Agreement b) Development Agreement	Greater of $5,000 or our actual cost to evaluate and process the transfer and train the transferee.¹⁰ $2,500	Before or simultaneously with execution of transfer documents. Before or simultaneously with execution of transfer documents.	You must satisfy all other terms of the Franchise Agreement governing transfers. You must satisfy all other terms of the Development Agreement governing transfers.

9 Neither the Master Sublicense Agreement nor any Sublicense are transferable independently from a Shoppe franchise. See Item 9(t).

10 You will not owe a transfer fee for transfers to family members.

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1417734 2.DOC

Form 2006

*.'■';, ^:- Name of Fee*	Amount	Due Date	Remarks¹
Audited Statement of Income and Retained Earnings and Audited Balance Sheet	Cost of the audited records¹¹	Upon the request of CBDI within 90 days after the close of each of your fiscal years.
Audit or Inspection	Cost of the audit¹² plus interest (see "Interest" below) on underpayment. The various Licensors also have a right to audit under the Sublicenses under these same terms. Also profits on infringing sales.	At completion of audit or inspection	You pay if the audit discloses a deficiency of 5% or more in the reported Gross Volume of Business or a deficiency in reporting sales of Licensed Articles, or if the inspection discloses unauthorized sales in another Franchisee's Primary Marketing Area.
Renewal Fee a) Initial Term Extension b) First Renewal Term c) Following Renewal Terms d) Master Sublicense	No fee. 25% of your initial franchise fee. 25% of the then-current initial franchise fee for similar new franchises.¹³ Unknown at this time.	Before the beginning of the Renewal Term. Before the beginning of the Renewal Term. Unknown at this time.	Must satisfy extension criteria. Must satisfy renewal criteria. Must satisfy renewal criteria. The Master Sublicense Agreement does not provide for a renewal term. If we and a Licensor renew a Sublicense, and a Licensor imposes a renewal fee on us, we may elect to impose a renewal fee for a renewal of your Master Sublicense Agreement.
Insurance	$4,000 to $6,000¹⁴
Indemnification	As incurred	CBDI	See Item 9 Chart.
Interest/Service Charge	Lesser of the daily equivalent of 18% of the overdue amount per year or the highest rate then permitted by law for each day the amount is past due beginning on the 6th day after the due date.	As incurred.¹⁵	See paragraph VIII.B.3 of the Master Sublicense Agreement.

11 This cost could range widely depending on the state of disarray or orderliness of your record keeping and books. Although we may require audited financials under the Franchise Agreement, we generally conduct audits at our own expense with CBDI personnel.

12 Costs include out of pocket expenses for travel, food, lodging, costs to reproduce information, and the hourly rate charged by the auditors. Employees of Disney who audit receive $60/hour. Interest begins from the date the underpayment was due.?

13 We limit these fees to not more than 50% of the sum of the initial franchise fee and the renewal fee paid by you for the previous Renewal Terms.

14 Insurance costs may vary depending on, among other things, your ability to qualify from a health and insurable risk standpoint for keyman insurance, state requirements, number of employees and other factors specific to your Franchised Business.

15 Interest begins to accrue on the 6th day after the payment due date. It is a late charge and not an alternative to timely payment.

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Form 2006

NameofFee

Amount

Due Date'- -^:':^:-'.y-

Remarks¹

Maintenance Cost $750 to $1,000¹⁶

Remodeling/Construction $10,000 to $20,000"

Replacements, Upgrades $3,000 to $6,000¹⁸ As required Replacement and upgrading of

and Modifications equipment and software, if

required by the Confidential Manuals and policies for the Intranet Agreement and the Admin _________________________________________________________________________Site Agreement________________

7. Initial Investment Your Estimated Initial Investment for A Development Agreement

Description	Amount	Method of Payment	When Due	To Whom Payment is to be Made
Initial Development Fee¹	$12,500+ 25% of the franchise fee for the second and each additional Shoppe you commit to develop; to $35,000+ 25% of the franchise fee for the second and each additional Shoppe you commit to develop.	Lump Sum	At execution of Development Agreement	CBDI²
Late Opening Fee³	Balance of initial franchise fee for. unopened Shoppe plus $500 per month until Shoppe opens.	Lump Sum and monthly	Month following the Default, and monthly thereafter	CBDI
Additional Funds (3 months)	$90,000 to $180,000	See Disclosures below for Initial Investment for a Shoppe.	See Disclosures below for Initial Investment for a Shoppe.	See Disclosures below for Initial Investment for a Shoppe.
TOTAL⁴	$90,000+ 25% of each additional franchise fee to $180,000+ 25% of each additional franchise fee.

16 Maintenance costs will depend largely upon your usage, care and upkeep of the Shoppe and equipment and whether you purchase the equipment and improvements new or used.

17 We may require remodeling (but not more often than every five years) to bring a Shoppe, Satellite or Kiosk into compliance with applicable specifications as they may change. We estimate any cost to remodel would not exceed the current range for construction of a new Shoppe, Satellite or Kiosk subject to general increases in construction costs.

18 The cost of these upgrades, replacements or modifications is difficult to estimate, because they depend on unpredictable developments in electronics technology.

¹ Franchise fees are estimated based on the lowest and highest amounts charged during 2005. See ranges for initial franchise fees described in Item 5.

² Termination of the franchise for failure to complete training to our satisfaction may entitle you to receive a partial refund of the initial franchise fee (see Item 5). However, in that event, we do not refund the balance of the development fee.

³ Available for one Shoppe only under the Development Agreement.

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Form 2006

Your Estimated Initial Investment for a Shoppe

Description	Amount	Method of > Payment :	'.:■. When Due : "	To Whom Payment is to be Made
Initial Franchise Fee¹	$12,750²to $35,O0O³	Lump sum	At execution of Franchise Agreement	CBDI⁴
Travel and Living (Expenses to attend Discovery Day and training)	$1,500 to $2,500 (per person)	As incurred	During training	Airlines, hotels and restaurants
Leasehold Improvements⁵	$20,000 to $50,000	Lump sum or as required by contractor	Before opening	Contractors
Equipment and Computer (Hardware and Software)	$19,750 to $32,000	Lump sum or as required by vendor	Before opening	CBDI and Vendors
Furniture, Fixtures & Cabinetry (including freight and installation)	$10,000 to $12,500	Lump sum	Before opening	Vendors
Signs	$3,500 to $5,000	Lump sum	Before opening	Sign company
First Month's Rent⁶	$1,500 to $3,000	Lump sum	Before opening	Landlord
Miscellaneous Opening Costs (Security Deposits and Initial Insurance Premiums)	$3,000 to $5,000	Lump sum	Before opening	Landlord and utility & service companies
Opening Inventory⁷	$5,000 to $8,000	Lump sum	Before opening	Vendors
Advertising Related Fees and Expenses⁸ (3 months)	$500 to $1,000	As incurred	As incurred	Vendors
Licenses and Permits	$500 to $1,000	Lump sum	Before opening	Government officials
Additional Funds (3 months)⁹	$12,000 to $25,000	As incurred	As incurred	Landlord, utilities, Vendors and Employees
TOTAL	$90,000 to $180,000

If you enter into a Development Agreement at the same time you sign a Franchise Agreement, you incur additional fees. See discussion of Development Agreement under Item 5 for specifics.

Includes $250 processing fee, if this is your first franchise. If you enter into a Site Agreement (see Exhibit D). we will apply the Site Agreement Deposit of $1,000 against the Initial Franchise Fee when you sign a Franchise Agreement.

See Item 5 for a description of the formula to calculate the initial fee. In highly populated Primary Marketing Areas, the initial fee may be more than $27,500, but that is an exception to the norm. The initial franchise fee includes a non-refundable $250 Processing Fee that is due no sooner than 10 business days after receipt of the Offering Circular, but before execution of the Franchise Agreement.

Failing to complete training to our satisfaction may entitle you to receive a partial refund of the initial franchise fee in accordance with Section 6(c)(ii)(l) of the Franchise Agreement.

In our experience virtually all franchisees locate their Shoppes in leased retail space. This estimate reflects construction of improvements within leased space.

This figure is for one month's rent only.

This amount includes approximately $600 for stencils and cookie cutters using the Disney Licensed Articles.

We base this estimate on the cost of listing your business in the local white and most predominantly used yellow pages of telephone directories in your Primary Marketing Area. The Additional Funds category includes other advertising costs, such as contributions to The MAP Group and the cost of a national toll-free telephone number. See Items 6 and 11.

This estimate includes an allowance for general operating expenses for approximately three months, including initial payroll and rents, which could range from $4,500 to $11,000 during that period and advertising and promotional expenses. We relied on our years in business and informal surveys of start-up costs conducted by us from among some of our franchisees to compile these estimates. This estimate does not take into account any revenue you might receive during the initial period. You should review these figures carefully with a business advisor before making any decision to purchase the franchise. See Items 6, 8 and 11.

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Form 2006

Your Initial Investment for a Satellite

Description	Amount	Method of; Payment	':_;v- When Due' ■;''	To Whom Payment is to be Made
Satellite Fee	$500	Lump sum	Upon notice to us of the actual opening date of your Satellite	CBDI
Leasehold Improvements	$15,000 to $30,000	Lump sum or as required by contractor	Before opening	Contractors
Equipment and Computer (Hardware and Software)	$8,000 to $13,000	Lump sum or as required by vendor	Before opening	Vendors
Furniture, Fixtures & Cabinetry (including freight and installation)	$10,000 to $12,500	Lump sum	Before opening	Vendors
Sign	$3,500 to $5,000	Lump sum	Before opening	Sign company
First Month's Rent	$1,200 to $2,500	Lump sum	Before opening	Landlord
Miscellaneous	$2,500 to $3,750	Lump sum	Before opening	Land and utility service companies
Opening Inventory	$2,500 to $4,000	Lump sum	Before opening	Vendors
Advertising Fee (3 months)	$375 to 750	As incurred	As incurred	Vendors
Additional Funds (3 months)	$6,000 to 12,500	As incurred	As incurred	Vendors
Licenses & Permits	$500 to $1,000	Lump sum	Before opening	Government officials
TOTAL	$50,075 to $85,500

Your Estimated Initial Investment for a Kiosk

	Amount	Method of Payment	When Due	To Whom Payment is to be Made
Kiosk Fee	$100'to $500	Lump sum	Upon notice to us of the actual opening date of vour Kiosk	CBDI
Leasehold Improvements	___5
Equipment and Computer (Hardware and Software)	$5,000 to $6,500	Lump sum or as required by vendor	Before opening	Vendors
Furniture, Fixtures & Freight	$1,000 to $2,000	Lump sum	Before opening	Vendors
Sign	$500 to $2,500	Lump sum	Before opening	Sign company
First Month's Rent	$500 to $1,500	Lump sum	Before opening	Landlord
Miscellaneous	$500 to $1,000	Lump sum	Before opening	Land and utility service companies

You may open a Satellite or Kiosk in connection with and after the opening of a Shoppe. You may not elect to open a Satellite or Kiosk instead of a Shoppe.

This fee is $100 per month for the term of your lease or agreement up to a maximum of $500 per year. The fee could be as little as $100 if you have only a one month lease on a Kiosk, and the Franchise Agreement does not require payment for more than one year's licensing fee in advance. The fee is based on the number of months in the term of your lease but limited by the $500 maximum per year.

The Kiosk generally takes the form of a cart or some kind of movable display (the cost of which would be included in Furniture, Fixtures and Freight), as opposed to a building or other permanent structure that would require build out expense.

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Form 2006

	Amount	Method or,; Payment	**-i-:-\-- When Due '■■'■**	To Whom Payment is to be Made
Opening Inventory	$1,250 to $2,000	Lump sum	Before opening	Vendors
Licenses & Permits	$500 to $1,000	Lump sum	Before opening	Government officials
Additional Funds (3 months)	$6,000 to $12,500	As incurred	As incurred	Vendors
TOTAL	$15,350 to $29300

8. Restrictions on Sources of Products and Services

At present we require that you purchase from us a customized computer software program and support programs used to prepare sales, marketing and accounting reports (the "POS Computer Program"), a small appliance required for use in the operation of a Franchised Business, and CBDI stencils and cookie cutters. We also require that you purchase specific computer hardware used to run the POS Computer Program from a designated supplier as well as plastic bossed containers from a designated supplier. See Item 5. Except for these items, we do not require that you purchase or lease from us or our designated suppliers any services, supplies, fixtures, equipment, inventory or real estate used in the establishment or operation of the Franchised Business.

We have contracted with two central suppliers to provide certain of products and supplies we require that you use. We do not require that you buy from these central suppliers, but the suppliers provide a "one stop shopping" service, and you can take advantage of any cost savings resulting from these arrangements.

We derive income from the purchases you are required to make from us. During 2005, we received revenues of $102,827 on account of franchisee purchases from us. These revenues accounted for approximately 3% of our total revenues for the year of $3,449,045.

You must join and remain a member in good standing of The MAP Group, an independent corporation whose members are substantially all of the franchisees in the Chain. See Item 11, ADVERTISING, for more information on The MAP Group. To remain a member in good standing, you must pay the advertising and promotion fee of 1% of your total revenues (See Item 6). You must participate in the advertising and marketing programs adopted by The MAP Group and approved by us. Participation means The MAP Group may require you to buy marketing materials created by The MAP Group for use by the Chain and to bear any expenses required for any marketing promotion adopted by The MAP Group. As an example, The MAP Group is currently coordinating with us adoption of a program to offer products through electronic commerce. We approve the use of the Licensed Marks and our Copyrighted Materials in any program created and implemented by The MAP Group. The MAP Group is the only group authorized to create advertising and promotional programs for use by the Chain. You may use your own advertising agency for local advertising, and create your own advertising programs for your Shoppe, but that does not relieve you from your obligation to participate in The MAP Group programs.

The MAP Group has contracted with us to provide administrative services to it. The MAP Group reimburses us for our out-of-pocket expenses related to these services. Although we can charge a fee for these services, we do not currently do so, nor do we otherwise derive any revenues from your membership in The MAP Group. The estimated proportion of the fees payable to The MAP Group is less than 1% of all required purchases and leases to open your Franchised Business. The proportion of the fees payable to The MAP Group as compared to all of your other costs to operate the Franchised Business will vary depending upon the amount of your total revenues and the programs adopted by The MAP Group.

We maintain a website on the Internet and an Intranet. You may have a home page on the Internet website, without cost. If you desire to maintain your own website in connection with your Franchised

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Form 2006

Business, you must first secure our approval by submitting hard copies of the material you propose to use on your website, and you must comply with the policies and procedures regarding the use of the Licensed Marks, the Licensed Articles (as defined in the Master Sublicense Agreement) and the Copyrighted Materials in connection with your website. In addition, if you do not operate your Shoppe in accordance with our standards of operation, we have the right to refuse or withdraw permission for you to maintain a website. You also must agree to assign the website Uniform Resource Locator to us upon a termination, expiration or transfer of your Franchise, unless we approve an assignment to a transferee, and you must sign the Limited Power of Attorney that permits us to effect such an assignment if you fail to do so. See Items 13 and 14 for other restrictions regarding the Licensed Articles. Except for a $100 charge for Authorized Users in excess of two, we have the right to charge an administrative fee for your participation in our online ordering program for the website. See Item 5 for a description of the anticipated $2.00 per order fee to be imposed during 2006.

We established and maintain an Intranet facility to facilitate communications among our franchisees, us and our employees, The MAP Group (see Item 11), the President's Advisory Counsel (see Item 11) and any other Associations, and suppliers. You must sign the Intranet Agreement in the form of Attachment I to the Franchise Agreement, and abide by our policies Intranet use. See Item 5 regarding administrative fees for additional Authorized Users.

You must sign any license agreements required by third party providers of software used on the Intranet.

We have established a program that permits customers to place orders online (the "Online Order Program"). You must sign an Admin Site Agreement in the form of Attachment J to the Franchise Agreement if you elect to be part of the Online Order Program. If you participate in the Online Order Program, you must comply with our policies for the Online Order Program. You have no obligation to participate in the Online Order Program. See Item 12 for effects of non-participation.

You must purchase all ingredients, equipment, fixtures and other supplies required to establish and operate the Franchised Business from suppliers we approve in writing and do not later disapprove. If you desire to purchase any items from a supplier not yet approved, you must submit a written request to us for approval in accordance with our required procedures in effect at that time. We notifies you of our approval or disapproval within 30 days of receipt of your written approval request. We do not have a formal set of written policies and procedures governing the approval or revoking of approval for its approved suppliers. We evaluate suppliers upon request and on a case by case basis. If the supplier has a good reputation, is financially sound, provides prompt, reliable service and provides goods meeting our quality standards, we generally approve the supplier. If not, the supplier will not receive approval. A supplier who becomes unreliable, fails to provide goods of required quality or otherwise demonstrates undesirable practices will have its approval revoked by deleting it from our list of approved suppliers and notifying Franchisees by one or more of the following means: in writing in either or both of the COOKIE CRUMBS® or COOKIE DOUGH® publications, on our Intranet or an announcement at COOKIE CONVENTION. We provide you a list of approved suppliers (which may include us or an affiliate), but do not intend to limit your choice from among approved suppliers in any way, except with respect to the Licensed Articles covered by the Master Sublicense Agreement.

Based on the current total pre-opening cost of goods, services, supplies, fixtures, equipment, inventory and real property, we estimate the percentage of the cost of these items that you must purchase from us or our designated supplier at between 5% and 11% of the total cost for a Shoppe, between 8% and 13% for a Satellite, and between 20% and 39% for a Kiosk.

Based on the current total cost of goods, services, supplies, fixtures, equipment, inventory and real property purchased or leased on an ongoing basis after opening the Franchised Business, we estimate

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the percentage of the cost of these items that you must purchase from us or our designated supplier at between 3% to 6% of the total operating costs for a Shoppe (depending on the Shoppe's size), between 2% and 3% for a Satellite and between 1% to 2% for a Kiosk.

We formulate and modify specifications and standards for our products through traditional research and development methods including kitchen testing and consultation with nutritionists and other consultants in the food industry. We formulate and modify non-food specifications and standards based on factors including market research and response, our and franchisees' experience and applicable law. Historically, we have notified franchisees of new specifications or modifications to specifications by mail, in our monthly newsletter COOKIE CRUMBS®, through our Intranet, at the annual convention or through modifications of the Confidential Manuals sent through the mail.

You must purchase and install, at your expense, all signs and equipment we require, and all other items we may require now and in the future. You must not install or permit the installation on the Shoppe premises or in relation to the Franchised Business of, any item that does not meet our standards and specifications.

We require that you maintain in sufficient supply, and use at all times, only operating materials, supplies and expendables that conform to our standards and specifications in effect at that time, and prohibits you from using non-conforming items without our prior consent.

You must sell and offer for sale all products we may require both now and in the future and only those that we may approve both now and in the future, and not later disapprove, as meeting our quality standards and specifications. If you sign a Master Sublicense Agreement, you must offer the Licensed Articles of those Sublicenses as a choice to your customers.

You must use only business stationery, business cards, marketing materials, advertising materials, printed materials or forms we approve in advance. All supplies or materials purchased, leased or licensed by you must always meet our standards specified in the Confidential Manuals. You must purchase any advertising and promotional materials created by The MAP Group in support of any promotion we and The MAP Group adopt. See Item 11. You must use the various marks covered by the Master Sublicense Agreement only in compliance with that agreement. In each case you must also comply with the instructions contained in the Confidential Manuals.

Other than the central supplier, no formal purchasing or distribution cooperatives exist, although some franchisees may informally join together in the acquisition of some supplies.

You must obtain from the insurance company of

The Free Franchise Resource Center

UFOC

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